A system like MF Utilities is a necessary precondition if fund investing is to reach its true potential in India
10-Jul-2015 •Dhirendra Kumar
Can the new MF Utilities website, run jointly by the fund industry, make a serious difference to the widespread accessibility of mutual funds? To understand the answer, let's try to see where India's fund investors are coming from.
It's a fundamental fact of modern life that Google knows everything. And now, it seems that it might know more about the potential of funds in India than those in this business do! It has long been accepted by everyone selling mutual funds in India that the bulk of the market is Mumbai, followed by Delhi and then bits and pieces of other cities. In terms of assets, Mumbai has a huge 43 per cent share; Delhi has 15 per cent (18 per cent with the NCR suburbs); and then Bengaluru, Kolkata, Chennai, Pune and Ahmedabad range from 6 per cent down to 2 per cent.
However, Google's fund search data tell a very different story. The same cities are at the top, but Mumbai's and Delhi's dominance is far less at just 17 and 13 per cent, respectively. The spread of people seeking information on the internet is far wider. For us at Value Research, Google's numbers just confirm what we've always known. In the web traffic on this website too, the pattern of usage has a long geographical tail.
To us, it doesn't really matter that while Value Research Online has lakhs of users in Mumbai and Delhi, it only has about 175 in Imphal, 50 in Eluru, and 20 in Barnala - or even the five or so in Mavelikara. We don't pay any special attention to the ones in Mumbai or Delhi. Any user is just as important as any other.
However, that's not the way things have been when it comes to investing in funds. By and large, access to funds has dropped sharply outside the big cities. Even though SEBI has given a large financial incentive to AMCs to establish their reach beyond the big cities, progress has been slow and spotty.
MF Utilities (http://www.mfuindia.com/) could change this. It's a platform through which distributors, investors can take all their fund-related actions. Investors can conduct transactions through a unified form across AMCs and get a unified account statement for their investments. Similarly, distributors can have a single point of access through which to carry out their clients' transactions and conduct their dealings with AMCs.
However, as it stands, MF Utilities is a project whose true potential is yet to be realised. It's has a mix of oddly offline elements with online access. Investors can register, get a 'CAN' (Common Account Number) and transact with all AMCs using a common form. However, this is a physical form. You can download it but you will then have to submit it through a physical point of presence near you.
Distributors too can deal with AMCs through MF Utilities but this interaction is also digitally hobbled, consisting, as it does, of uploading scanned forms, which are then data-entered by hand. This would have been revolutionary in 1999, but this is 2015, and today such a workflow is an embarrassment.
Still, MF Utilities is a beginning and is better than nothing. My concern is that it may not move forward to a real, pure digital mode that will make buying mutual funds easily accessible from any corner of the country with the same ease as any web-based service like Value Research Online. Hopefully, the industry will not get scared by the inevitable changes that such a system will bring. Such a system is a necessary precondition if fund investing is to reach its true potential in India.